POCKETBOOK: Week ending August 11, 2017

•August Heat

Every day is a new day on Wall Street, Main Street and Pennsylvania Avenue. What happens from the latter, however, impact all streets across America as well as all of the lives of those residing on them. So, the heat is on.

Re the markets, while we are only half way through the month, if history is any guide the Stock Trader’s Almanac reports that August is the 10th worst performing month for the Dow and 11th worst for the S&P500 and NASDAQ.

On the bright side, historically there have been a few more up August months than there have been down ones: Over the last 67 years, the month has closed up 37 times and 30 down ones for the Dow and S&P.

Market Quick Glance

Two new highs reached for the DJIA and S&P500 but don’t get too excited—all four indices closed with year-to-date figures —and 1-year returns— lower on Friday than they were on Friday of the previous week (8/4/17).

Something to chew on from the Bespoke Investment Group piece titled, “U.S. Equity Share Continues To Drop” published August 11, 2017: “While President Trump can claim that the stock market has done exceptionally well since he was elected, he’s actually overseen a huge loss in the US’s share of total world stock market cap. When grading a presidency, you could argue that the latter is actuall more important….”

Below are the weekly and 1-year index performance results— including the dates each reached new highs— according to data from CNBC.com. Data is based on prices at the close of business for the week ending on Friday, Aug. 11, 2017.

-DJIA + 10.60% YTD down from last week’s +11.79%

1 yr Rtn +17.43% down considerably from last week’s 20.38%

The DJIA reached another new all-time high on August 8, 2017 of 22,179.11

(Previous highs since March include: August 4, 2017 of 22,092.81; 21,841.18 on July 28, 2017; July 14, 2017 of 21,681.53; July 3,2017 of 21,562.75; 21,535.03 on June 20, 2017; 21,391.97 reached on June 14, 2017; 21,305.35 on June 9, 2017; 21,225.04 on June 2, 2017; and 21,169.11 on March 1, 2017.)

-S&P 500 +9.04% YTD down from last week’s 10.63%

1yr Rtn +11.69% down considerably from last week’s +14.44%

The S&P 500 reached a new all-time high on August 8, 2017 of 2,490.87.

(Previous high of 2,484.04 was reached on July 27, 2017 and 2,477.62 was reached on July 20, 2017. Prior to that date new highs and dates include: 2,463.54 on July 14, 2017; 2453.82 on June 19,2017; 2,446.2 reached on June 9, 2017; 2,440.23 reached on June 2, 2017; 2,418.71 reached on May 25, 2017; 2,405.77 reached on May 16, 2017; 2403.87 on May 9, 2017; 2,400.98 reached on March 1, 2017.)

-NASDAQ +16.23% YTD down from last week’s +17.99%

1yr Rtn +19.66% down considerably from last week’s 22.94%

The Nasdaq reached a new all-time high of 6,460.84 on July 27, 2017.

(Previous highss include: July 20, 2017 of 6,398.26; 6,341.7 on June 9, 2017; 6,308.76 on June 2; 6,217.34 reached on May 25; 6,170,16 on May 16; 6,133 on May 9, 2017; 6102.72 on May 2, 2017; 6074.04 on April 28, 2017; and 5,936.39 on April 5, 2017.)

-Russell 2000 +1.26% YTD down considerably from last week’s +4.07%

1yr Rtn +11.81% down a lot from last week’s +16.36%

The Russell 2000 reached its latest all-time high on July 25, 2017 of 1,452.09.

(Previous highs include: 1,452.05 on July 21, 2017; 1,433.789 on June 9, 2017; 1,425.7 reached on April 26, 2017 and of 1,414,82 reached on March 1, 2017.)

-Mutual funds

Play it again, Sam: The average cumulative total reinvested returns for equity funds on Thursday, August 10, 2017 were again lower just as they were at the previous week’s close (8/4/17).

At the close of business on Thursday, 8/10/17, the average YTD total return for U.S. Diversified Equity Funds closed at 7.05%. That’s down from the 8.93% average return of the week before; the 9.59% average return of the week before it; and the 9.84% return of the week before that. All according to Lipper.

Interestingly, Large-Cap Growth Funds had an average y-t-d return of +16.87 and not far behind it Equity Leverage Funds, +16.39%. Both of those fund types fall under the broad Diversifeid Equity Funds heading.

It was Global Science/Technology Funds that posted the highest average returns of +25.54%, under the Sector Equity Funds heading and Natural Resources Funds that posted the lowest, -17.53% on average.

And World Equity Funds continue to provide investors with highest average returns, +17.76%. There are 4,516 funds that fall under that heading.

Visit www.allaboutfunds.com for more information about how various equity and fixed-income funds have rewarded investors over the short-and long-term, based upon Lipper data. Short-term meaning weekly and monthly performance returns; longer-term includes quarterly, year-to-date, 1-yr, 2-yr, 3-yr and 5-yr returns.

Sad

According to the results of a recent three-question survey, published on CNBC.com, respondents don’t know beans about compound interest, inflation and stock market risk. Only 30% answered all three questions correctly.

Here’s the quiz and I sure do hope you’re smarter than the not-so-bright 70%:

Question 1

Suppose you have $100 in a savings account and the interest rate was two percent per year. After five years, how much do you think you would have in the account if you left the money to grow?

More than $102
B. Exactly $102
C. Less than $102
D. I don’t know

The correct answer is A. You’d have $102 after the first year. Over the next four years, interest will grow on that $102, meaning you’ll have more than $102. It’s a phenomenon known as compound interest.

Question 2

Imagine that the interest rate on your savings account was one percent per year and inflation was two percent per year. After one year, how much would you be able to buy with the money in this account?

More than today
B. Exactly the same as today
C. Less than today
D. I don’t know

The correct answer is C: less than today.

Question 3

Do you think the following statement is true or false: Buying a single company stock usually provides a safer return than a stock mutual fund.